Car industry on brink as SA Premier seeks Abbott’s support

If Holden has no firm commitment on funding from the Coalition within a couple of months, it will follow Ford Australia and announce it is leaving.
Photo: David Mariuz

by
Phillip Coorey | Mark Skulley

General Motors Holden needs a ­commitment from the Abbott government on financial subsidies within two months or it is likely to announce it will cease making cars in Australia.

Holden had promised it would keep its Adelaide manufacturing operations until 2022 under a $275 million “co-investment" negotiated by the ­Gillard and South Australian Labor governments that would see it develop two new vehicles after 2015.

But the US-owned company now argues the circumstances have changed and the new Coalition government has yet to commit to any specific arrangements for the industry beyond 2015 other than to promise a Productivity Commission review into car industry subsidies.

If Holden is to stay until 2022 under the deal with Labor, it needs to begin preparations straight after Christmas.

If it has no firm commitment from the Coalition within a couple of months, it will follow Ford Australia and announce it is leaving.

Such a move would make it less ­viable for Toyota to keep making cars in Australia because the parts industry that supplies the car makers would be too small, meaning that one of the government’s first big decisions may be whether Australia will continue to manufacture cars.

The Abbott government is aware of Holden’s timetable and new Industry Minister Ian Macfarlane will visit Holden’s Adelaide plant and Toyota’s Melbourne operations in early October.

This week, he stopped short of guaranteeing sufficient support to ensure Holden stays and produces the two new cars, including one to replace the ­Commodore.

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“I’ll ask the opposition shadow minister to come along so there’s no politics," he said. “It’s about everyone doing what needs to be done. I want to see Holden bring out a new model. Now whether that’s possible or not, let’s see. But let’s not die wondering.

Weatherill pleaded case in letter to Abbott

“If it becomes political, if it becomes a contest between politicians, then we might as well forget about it, the car industry is doomed."

South Australian Labor Premier Jay Weatherill pleaded Holden’s case in a letter he sent to Prime Minister Tony Abbott congratulating him on his election win. The letter, written four days after the poll, cited Holden’s future and road funding as South Australia’s two top concerns.

Mr Weatherill said if Holden left Adelaide, there would be 16,000 jobs lost, meaning the viability of the manufacturer was important to both the state and national economies.

Mr Weatherill urged Mr Abbott to honour Ms Gillard’s $275 million deal, of which the federal government’s ­contribution would be $215 million. South Australia would contribute $50 million and Victoria $10 million.

“Co-investment packages are critical to maintaining a viable advanced ­automotive manufacturing presence in Australia, ensuring sufficient investment is made by vehicle manufacturers," the letter said.

Mr Weatherill said on Wednesday Holden would leave if it was not satisfied with the Coalition’s approach.

“There’s no doubt that unless there’s a change of policy position in the current government my assessment is that Holden will close and it’s not just my assessment, it’s consistent with the remarks of Holden themselves," Mr Weatherill said. Industry insiders believe the closure of Holden’s assembly plant in Adelaide would undercut the critical mass of the component ­supply chain, leading to the closure of Toyota’s assembly plant in Melbourne. Ford plans to cease local manufacturing in October 2016.

Holden has a workforce of 4200, which includes about 1700 assembly workers in Adelaide. The rest are mostly based in Melbourne at its engineering operations, corporate head office and engine plant. Toyota Australia has about 4200 workers, including about 2500 at its Altona assembly plant.

Devereux must lock in policy settings to proceed

Holden managing director Mike Devereux has to lock in policy settings with the new government before he can win approval from his US parent company, General Motors, to proceed with a $1 billion investment from 2016.

Mr Devereux has said Holden will keep making the four-cylinder Cruze in Adelaide, along with a “next generation" model from around 2106. The new model will retain the Commodore name, but will be a global platform rather than a home-grown design.

Under the former Labor government, the $275 million taxpayer-funded package was supposed to lock in Holden as a local producer until 2022.

This federal funding is due to start this financial year and continue for four years. Holden argues circumstances have changed since the deal was struck. This includes a currency squeeze between the high dollar and a weak ­Japanese yen, which has made exports dearer and imports cheaper.

The Coalition has pledged to cut $500 million from annual car industry funding through the Automotive Transformation Scheme (ATS) between now and 2015.

It wants the ­Productivity Commission to review future car industry funding after that date.

It has argued that the industry will benefit from axing Labor’s $1.8 billion slug on fringe benefits tax on cars used for business purposes and from scrapping the carbon tax, but that has not provided the certainty sought by Holden and Toyota.

Labor’s former industry minister, Kim Carr, said on Wednesday the investment decisions had to be taken by GM’s international operations in the next few months.

Next-generation Holden to have 30pc local parts

“They [the Coalition] have got to change the policy – otherwise we will lose the industry," he said. “The automotive industry is an ecosystem, it’s not just one company. There are 160 companies registered with the ATS scheme, component makers that are tied into the three major [car making] ­companies."

Australian-sourced components comprise about 50 per cent of the new Holden Commodore, below the local content of the Ford Falcon (around 70 per cent) and the Toyota Camry (65 per cent).

The next-generation Holden is expected to have about 30 per cent local parts because it will use a global ­platform, rather than the Commodore design.

Holden wants to start work on modifications to its body shop in Adelaide over a scheduled production break this summer to have the works ready to start making the new model around 2016. Since last month the Holden ­operations have been overseen by Shanghai-based GM executive Stefan Jacoby, who is expected to visit ­Australia by the end of the year.

Mr Jacoby is the executive in charge of GM’s ­international manufacturing operations apart from North America and China.

As the industry minister during the Howard government, Mr Macfarlane has experience with the automotive sector. The Howard government periodically gave money to Mitsubishi to keep its manufacturing plant in Adelaide bt eventually, the plant closed.